New rules ease low-income homebuying through state

Income limits raised, purchase now may be made directly from a private builder

Sep. 29, 2012

Mike Erickson of Erickson Home Maintenance and his son Tristen, 17, put up a garage door Friday in Lennox on a Governor's House owned by Amy Palmer. The program is making participation easier. / Melissa Sue Gerrits / Argus Leader

Governor’s House deliveries

It just got a little easier to buy a Governor’s House, thanks to new partnership that allows people to buy the homes through a private builder.

The South Dakota Housing Development Authority recently approved a series of changes to the program, which allows qualifying participants to buy a home for $35,500. That includes delivery of the home but not the cost for the lot, foundation and other related costs. The homes still are built by medium-security inmates at the Mike Durfee State Prison in Springfield, but until now purchasers had to coordinate the purchase of the lot, foundation work and utility hookups, which officials say deterred some from participating in the program.

“We have had some folks unfortunately in the past that signed up to a Governor’s House and ended up canceling because it just got to be too overwhelming for them,” said Paul Kostboth, director of single family development with the South Dakota Development Authority.

■ Annual income limits have been increased to $42,280 for households of one or two people and $48,320 for households of three or more.

■ School districts in rural communities of 2,500 people or fewer may purchase a Governor’s House as a recruitment tool.

■ Developers can purchase a home for rental purposes when financed under programs that require long-term affordable rent limits, such as tax credits.

The Governor’s House program was created in 1996 and, since then, 1,985 homes have been delivered statewide, 38 in Sioux Falls.

But since its beginning, the program has been a sore spot with private industry because of concerns that the government was competing with private business.

“We weren’t sure that the government should be in competition with us,” said Mel Zelmer, a homebuilder from Tea. “It’s sort of an unfair advantage from a labor standpoint.”

The new partnership fixes that issue and will allow the program to be a tool for private industry instead of having to turn people away who don’t have the income for traditional housing, Kostboth said.

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“Our goal has always been to serve the market that the developers can’t serve,” he said. “Discussion was always what’s the magic number that private industry can’t serve so that we don’t get into their market and don’t steal their business.”

Zelmer said he is interested in buying homes for lots in some smaller communities, and as a member of the state home builders association was involved in discussion to change the regulations. He said he often comes across people who want to buy or build a home but don’t have the income.

The ability for a builder to take care of some of the construction tasks will allow the program to benefit more people, he said.

“With a reputable contractor buying a house, putting it on a lot and getting ready for turn-key occupancy, that will make the program a lot better,” he said.

Amy Palmer had a Governor’s House delivered to an acreage in the Lennox area a few weeks ago where she now lives with her two kids.

She has horses and wanted to live in a rural area but realized that on her income it was a better investment to have a new home rather than buying a fixer-upper.

The hardest part was finding financing for the construction loan, she said. But in her case, she didn’t mind coordinating the project, and to save costs she said she probably would have bypassed a private builder even if it were available. As it is, she looked into hiring a general contractor to coordinate the work on the house and found that it would have cost her about $10,000 more in fees.

“To me, that’s $10,000 I can stick into my house,” she said.

The goal, Kostboth said, is to make the housing available to more people. In the case of the school district guidelines, it could be a tool for small towns having a housing crunch.

Jarod Larson, the superintendent of Timber Lake School District in north-central South Dakota, has been in contact with Kostboth about the program. While the district is researching the possibilities, it has not yet decided whether to use the program.

It’s nice to have the option, he said, but even though housing is tight in town, the idea of owning property raises financial and maintenance concerns.

“One of the major concerns that I have as an administrator, I do not believe it is the responsibility of the school to be a landlord,” Larson said. “However, it is the responsibility of the school to get highly qualified instructors to teach our children. When housing limits our ability to do that we are going to have to take a serious look.”